Spain Power Deficit Widens by 46% as Steps to Close Gap Founder

By Todd White -
Apr 25, 2013

Spanish power companies’ regulated
revenue fell short of what the government promised by 5.6
billion euros ($7.3 billion) last year as new taxes and other
measures failed to narrow the gap between costs and sales.

The shortfall, known as the tariff deficit, expanded 46
percent from the 3.85 billion euros registered a year earlier,
according to a report on the website of the National Energy
Commission dated April 18. It’s more than triple a government
forecast from last April, the commission said.

For more than a decade, Spanish governments have forced
electricity retailers including Endesa SA (ELE) and Iberdrola SA (IBE) to
pay above-market prices to renewable-power producers without
letting them recover all of those costs through higher rates to
consumers. Clean-energy subsidies for generators such as solar
and wind parks jumped 23 percent in 2012 to 8.6 billion euros.

Prime Minister Mariano Rajoy has approved a series of
measures to close the gap between costs and sales, including
lower renewables subsidies for new projects and a 7 percent tax
on generation. The deficit has continued to grow as aid to
existing projects rises and cuts in regulated costs fall short.

The deficit generates debt on the books of power companies
until they can bundle it into securities and sell it to
investors, who are paid interest out of future consumer bills.